The leading currency of the week just past was the greenback. It plunged versus the other majors on Yellen’s dovish comments and Non-Farm Payrolls data. The sterling was traded lower as well on the Brexit concerns despite the better than expected GDP Growth for Q4. Meanwhile, the single currency was in a range-bounded mode without heavyweight numbers to determine its direction.
[B]U.S. NFP Report and Yellen’s Comments Plunged the Dollar[/B]
The dollar ended last week broadly lower as the U.S. unemployment rate rose for the first since last May to 5.0% from the record low level at 4.9%. The economy added a strong number of jobs of 215K above forecasts of 205K while the average hourly earnings rose by 0.3% from a contraction of 0.1% the month before. Earlier in the week, on Wednesday, Fed Yellen’s comments had also a negative impact on the domestic currency. The Fed Chairwoman said that Fed should “proceed cautiously” before tightening the monetary policy as she expects that global risks to have a deep impact on U.S. economy. She also justified the slower than initially forecasted rate rises due to the global developments and the increased risks. Moreover, she explained again that China’s slowing growth, volatile oil prices, and the perspective that inflation will not reach Fed’s 2% target soon, forced the central bank to gradual and slow rate hikes.
[B]THE WEEK AHEAD: Apr 04 – Apr 08[/B]
We start the day with Manufacturing PMI from UK which is expected to slump to 54.0 from 54.2 prior. Meanwhile, Eurozone’s Sentix Investor Confidence for April will be released and a while later, Producer Price Index for February. A few hours later, attention turns to U.S. where the Labour Market Conditions Index for March will complete Friday’s non-farm payrolls data. February’s Factory Orders are forecasted to plunge by 1.6% from a rise of 1.6% the month before.
Later in the second half of the trading day, the Bank of Canada Governor Stephen Poloz will give a speech followed by Bank of Canada Business Outlook Survey. The NZIER Business Confidence for the first quarter in New Zealand will be out, while, during the night Australia’s Trade Balance, Exports and Imports for February will be eyed before the RBA Policy Meeting. At 04:30 GMT time on Tuesday, the Australia’s central bank will release its interest rate decision alongside with a rate statement. Even though no changes are expected, traders will want to learn if the policymakers will hint further rate cuts in the near future.
On [B]Tuesday [/B]morning, the German Factory Orders for February will be released. The final Markit Services PMIs for March in U.S., UK, Germany and Eurozone as a whole will be released and are expected to meet the flash estimations.
After that, Eurozone Retail Sales for February are predicted to show a flat month compared to January and to have risen by 1.9% yoy from 2.0% before. After the U.S. Markit Services PMI for March, the ISM Non-Manufacturing PMI for March and the JOLTS Job Openings for February will be published as well. In New Zealand, the Global Dairy action will take place.
[B]Wednesday [/B]is pretty quiet. The only notable macroeconomic update is the FOMC minutes that will be released on 18:00 GMT. The traders would like to decipher Fed’s tone on interest rates as Fed policymakers last week hinted a possible rate hike April and more than two rate hikes in the year while Yellen denied that rumors with her dovish stance at her speech later in the week. Other news that is coming up is the ECB Non-monetary policy meeting, which is unlikely to stoke much interest among the investors and the UK Halifax House Prices in the European morning.
[B]Thursday[/B]’s economic calendar is mostly quiet in terms of economic indicators, thus, I would expect a quiet day driven largely by speeches from central banks leaders. The first spotlight of the day is the ECB President Mario Draghi’s speech at the afternoon, after the release of the ECB Monetary Policy Meeting Accounts. The second significant event that will draw market’s attention is Fed Chairwoman Yellen speech at 21:30 GMT. On the second half of the trading session, the weekly U.S. Jobless Claims will be out as well. In Canada, the Building Permits are expected. Overnight, the Japanese Consumer Confidence Index for March will be watched.
On [B]Friday [/B]morning, the German Trade Balance, Exports, and Imports for February will be out. A while later, the UK Industrial and Manufacturing Production for February, as well, will be released. Both of them are forecasted to show a slowdown compared to the last month. The Manufacturing Production is expected to contract by 0.2% mom from an increase of 0.7% the month before and to have plunged by 0.7% yoy versus 0.1% before. On the other hand, the Industrial Production is expected to rise by 0.1% mom from 0.3% before while is expected to remain flat on a yearly basis. Another highlight of the trading day is Canada’s job report. No changes are expected to the 7.3% unemployment rate while the Employment Change to show that the economy added 15.3K in March from -2.3K in February.
The last economic update that will captures traders’ attention is the UK NIESR GDP estimate for the three months to March – no forecasts are available.